What if during a bankruptcy case a debtor dies or becomes incompetent?  In a Chapter 7 bankruptcy case, death or incompetency will not alter the process because the trustee is in charge of administering the estate for the benefit of the unsecured creditors. The situation may differ in a bankruptcy case that involves reorganization of the debtor’s finances as the ultimate goal, as in Chapter 11, Chapter 12 and Chapter 13 bankruptcy cases.

As stated in the Federal Rules of Bankruptcy Procedure, death or incompetence of the debtor should not reduce or put an end to a liquidation case under Chapter 7. In such an instance the estate should be administered and concluded in the same manner, so far as possible, as though death or incompetency had not happened. If a reorganization, family farmer’s debt adjustment, or individual’s debt adjustment case is pending under Chapter 11, Chapter 12, or Chapter 13, the case may be dismissed; or if further administration is possible and in the best interest of the parties, the case may proceed and be concluded in the same manner, so far as possible, as though death or incompetency had not happened.

In a reorganization bankruptcy, what occurs in such an instance is dependent on whether the case can proceed. If proceeding with the case will be helpful to those involved, it may continue.

This allows the administrator of the debtor’s estate to protect exempt assets for beneficiaries, or in the case of incompetence it allows a conservator to manage the creditors involved in the case.

If you live in Denver, Aurora, Arvada, Brighton, Broomfield, Commerce City, Englewood, Highlands Ranch, Lakewood, Lafayette, Littleton, Northglenn, Westminster, Wheat Ridge, or Golden, Colorado, please feel free to contact me with any questions. Kevin D. Heupel, Colorado Bankruptcy lawyer, 303-955-7570, Colorado Bankruptcy Help Email, personal bankruptcy free-consultation form.